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Kristin Davis is a fan of hedge funds and not merely because
some managers used to patronize her stable of escorts. Davis,
who counted elite athletes and former Governor Eliott Spitzer
as clients of her profitable prostitution ring, got her start
in the back office of a California hedge fund.

That comes from nearly a decade working in the hedge fund
industry. Davis started her career at Brookhaven Capital
Management, a now-closed Menlo Park, Calif.-based fund. She
began in 1994 in an administrative position and says she worked
her way up over six years to controller at the age of 25 (a
former Brookhaven executive confirmed her employment, calling
her a "quick learner" and "very entrepreneurial").

Next, Davis did back-office support—regulatory
filings, net asset value calculations, processing
securities—for hedge funds at third-party
administrators Conifer Securities (a spokesman for Conifer
confirmed only that Davis worked at the company from February
2002 to March 2003) and Hemisphere Management, where she says
she was vice president of operations in charge of a staff of 40
in the firm’s Boston office, which could not
immediately be verified.

AR recently asked Davis, who was convicted of
promoting prostitution and served four months on
Riker’s Island, about her hedge fund experience
and how she’d use it as governor.

AR: How would your hedge fund experience help
you to run New York State?

KD: My hedge fund experience most definitely helped prepare me
for everything I've encountered in life. My first employer was
great, but also very tough, which gave me a strong work ethic.
If I was off even a basis point in our monthly accounting, I
had to search through millions of trades—and
dollars—to find the discrepancy.

My boss used to say "under promise, over deliver." I carry that
saying with me now because most people underestimate me because
of the way I look, and I realize it makes it easy to over
deliver since the expectations are low.

I also went through bankruptcy with Brookhaven and worked with
the firm to try and save it, so I understand how to deal with
companies in crisis.

Lastly, I've also worked with portfolio managers whose egos
won't allow them to dump failing stocks or to change their
trading strategy and I understand how pride and ego need to be
taken out of the equation when running a business.

If governor, how would you manage the state pension
system? Would you allocate more to hedge funds?

If elected, I would move the state pension to be directed by a
board of trustees rather than the current system where all
investment decisions are made by the comptroller. Having one
man in charge of billions of dollars invites corruption. I
favor a diversified portfolio with hedge fund products
included.

How would you approach hedge fund
taxation?

I am opposed to higher levels of taxation. I oppose the stock
transfer tax as well as the New York City tax. The New York
City tax specifically has forced many hedge fund managers to
relocate outside the state to areas like Stamford,
Connecticut.

New York City has a separate income tax in addition to New York
State income tax. This can be up to 3.6%, which has driven a
number of hedge funds out of the city (and state) to areas that
don't have this additional tax. I don't think businesses should
be penalized (from a tax perspective) for doing business within
NYC.

I favor repealing that tax to attract funds to come back to the
city and generate revenues for the state. I also favor cutting
the state corporate tax rate in half to stimulate
economic growth. Lowering the taxes would allow companies to
expand as they will have more capital. This is simple
economics.

Are the new SEC/state registration and disclosure rules
strong enough?

I cannot assess the SEC rules right now because I don't think
they are properly being enforced. We need to enforce the rules
we have, and then examine them to see if they are
adequate—and working.

Should hedge funds be allowed to market
themselves?

Yes, hedge funds should be allowed to market themselves. Like
any other investment vehicle, hedge funds deserve the same
right to market. Now that hedge funds need to register with the
SEC, they should be allowed to market themselves.

Did clients of your escort service include hedge fund
employees?

Yes, my agency had many hedge fund clients. I spoke with a many
of them on the phone when I booked their appointments. I talked
shop with them and a few of them offered me jobs at their
firms. I told them they couldn't afford me.

Ms. Davis' story keeps changing about her alleged hedge fund past. She did not mention Hemisphere when the Daily News asked her about it.

Where are the co-workers raving about her great work? How about the former supervisor with the glowing recommendation?

Perhaps she's glossing over her past?

Warren Redlich Oct 28, 2010

Hemisphere was a legitimate hedge fund administrator that has been bought, twice. In 2002 it was acquired by The BISYS Group, which was subsequently sold to Citi in 2007, an expansion of their fund services.

Lawrence Delevingne Oct 28, 2010

Hemisphere Management?

"Located in Rochester NY, the company has a portfolio consisting of hotels, restaurants and investment properties. With over 15 years in the hospitality industry ..."